Prestige Pricingestablishes a relatively high price to develop & maintain an image of quality that appeals to status-conscious customers; seller uses price to create an overall image of the firmGoals of Pricing Strategy for Not-for-Profit OrganizationsProfit maximization, Cost recovery, Market incentives, & Market Suppression2 Basic Ways to Determine PriceApplying theoretical concepts of supply & demandCompleting cost-oriented analysis4 Types of Market StructuresPure Competition, Monopolistic, Competition, Oligopoly, & Monopoly2 Types of Costs that make up a product’s total costTotal variable costs & Total Fixed costsDeterminants of ElasticityAvailability of substitute or complementary goodsClassification of a good or service as a luxury or a necessityThe portion of a person’s budget spent on an itemThe time perspectiveUsual Relationship between Elasticity & RevenueA price cut increases revenue only for a product with elastic demand, and a price increase raises revenue only for a product with inelastic demand3 Reasons it is difficult to put price theory into practiceAssumption of price theory is all firms attempt to maximize profits; doesn’t always happen in practiceDemand curves can be extremely difficult to estimatePoor communication between economists & managers, making it difficult to apply price theoryFull-Cost Pricing- uses all relevant variable costs in setting a product’s priceIncremental-Cost Pricing-

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